Dr. Reddy’s to buy UCB’s select brands

Deal adds to the company's respiratory, dermatology portfolio

Dr. Reddy’s Laboratories is acquiring select brands of Belgian drugmaker UCB in India, Nepal, Sri Lanka and Maldives in a euro 118 million (Rs.800 crore) deal.

A definitive agreement has been signed, and the revenues of the business to be acquired were about Rs.150 crore in 2014, the company said in a statement on Wednesday. The transaction — on a slump sale basis — includes about 350 employees engaged in operations of UCB’s India business.

The transaction is expected to be closed in the first quarter of 2015-16.

DRL Senior Vice President and India business head Alok Sonig said the portfolio would accelerate Dr. Reddy’s presence in the high growth areas of dermatology, respiratory and paediatrics with leading brands like Atarax, Nootropil, Zyrtec, Xyzal and Xyzal M.

Concern over acquisition cost

Reuters reports from Mumbai:

As competition heats up, Indian drugmakers are looking to strengthen existing portfolios porfolios in the fast-growing emerging markets, as well as at home.

Sun Pharmaceutical Industries closed a deal to buy rival Ranbaxy Laboratories Ltd last month, strengthening its presence, particularly in emerging markets.

Some brokerage analysts, however, expressed concern about the acquisition cost, with the deal valuing the UCB business more than five times its sales, which, they said, was higher than the industry standard. "You would demand this kind of valuation when you're buying the leader in the industry. And I'm not sure if Dr. Reddy's has got leading brands from UCB," said Nimish Mehta of Equirus Securities.

UCB Chief Operating Officer Mark McDade said in a statement the deal would allow the Belgian company to sharpen its focus on its neurology portfolio in India. Dr. Reddy's said it expected to close the deal in the first quarter of this financial year.